business news in context, analysis with attitude

by Kevin Coupe

The Wall Street Journal reports that PepsiCo “is launching the first new advertising campaign for its flagship Pepsi-Cola in three years - offering one of the most visible signs PepsiCo is throwing new weight behind its biggest brand after it sank to No. 3 in U.S. soda sales last year, trailing not only Coke but Diet Coke.”

The story notes that the new campaign is a shift in focus for CEO Indra Nooyi: “Hailed as a strategic visionary since taking PepsiCo's reins nearly five years ago, Mrs. Nooyi is facing doubts from investors and industry insiders concerned that her push into healthier brands have distracted the company from some core products. Emphasizing fruit juice, oatmeal and Gatorade, she has set an ambitious goal of more than doubling revenue of nutritious products to $30 billion by 2020 while cultivating a corporate image tuned in to health and global social responsibility ... Critics also say PepsiCo isn't the salesman it used to be, pointing to marketing missteps such as a noisy compostable SunChips bag that led to a rapid sales fall-off and a makeover of Tropicana orange juice that had to be ditched.”

In an interview with the Journal, Nooyi “acknowledged that she may have spent a disproportionate amount of time talking about healthier products, but said it's part of a ‘deliberate strategy’ to diversify the portfolio. Consumers increasingly want healthier foods and beverages, she said, and PepsiCo has to satisfy critics about health concerns. ‘I look at our numbers and I feel very, very good about the trajectory of the company,’ she said.”

In covering Nooyi’s speech to the Consumer Goods Forum (CGF) Global Summit in Barcelona, in which she talked about what the industry must do to help combat the obesity epidemic, I suggested that her goals might be at odds with how she is benchmarked by investors:

“At the end of the day,” I wrote, “Nooyi will be judged on whether she can get kids to eat two bags of chips instead of one...”

There’s the rub.

In the Journal article, people from the bottling community are quoted as wondering whether Nooyi is “ashamed” to be selling “sugar water.” From a sustainability perspective, that’s an irrelevant question - Nooyi would argue that she is positioning the company for the future, and that this is a long-term play. But from a short-term investor perspective, that’s a perfectly legitimate question.

The whole thing points up broader, eye-opening questions about how success is defined, how leaders are benchmarked, and how progress is measured. In a world where change is fast-paced and it seems like evolution often gives way to revolution, perhaps the old measurements cannot apply, or at least must be tweaked to integrate an understanding of new consumer realities.
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